'Made In America' Back: A Good Thing?

Anthony Mirhaydari MSN Money April 12, 2012

4/11/2012 8:09 PM ET

By Anthony Mirhaydari, MSN Money

For all our problems, the stage is set for a renaissance of US manufacturing. That's largely because our dollars are worth less and our pay is shrinking.

Clearly, something's still wrong with the economy. By the metrics that matter to most people, the Great Recession has not ended. Employment, retail sales, industrial production, home prices, most of the stock market and real incomes are all below their 2007 peaks. Food stamp usage is at a record high and rising.

But something's going right, too. And I want to focus on that this week.

American competitiveness is back, albeit largely because of the pain we've endured. Our dollars are worth less, and real wages are lower. Corporations are responding, with new factories springing up and manufacturing jobs blooming like flowers welcoming the spring. Overall, the U.S. has added nearly 500,000 manufacturing jobs since the beginning of 2010 -- the first period of significant growth since the late 1990s.

Meanwhile, the costs of producing goods overseas, and getting them here, are rising. Workers in places like China are demanding more, and oil prices make shipping costlier.

Products still made in America

Experts say these trends are likely to continue.

Bank of America Merrill Lynch researcher John Inch wrote in a recent note to clients that the "U.S. economy is in the early stages of a long-term manufacturing renaissance." Analysts at the Boston Consulting Group add that rising wages and other forces have steadily eroded China's "once-overwhelming cost advantage as an export platform for North America."

Anthony Mirhaydari

Thanks to higher U.S. worker productivity, as well as supply chain, cheap energy (natural gas) and logistical advantages, the BCG team says that by around 2015 "it may start to be more economical to manufacture many good in the U.S."

In short, we could be on the cusp of revival of "Made in America," with workers paid good wages for building things again. And for the millions in the army of the unemployed, it can't come soon enough.

Don't get me wrong. Our problems still run deep, and I'm not saying happy days are here again; I'm merely pointing out one of the few silver linings to be found.

We've long been too reliant on credit to supplement stagnant wages -- and that's left the West with an $8 trillion debt hole, according to Credit Suisse calculations. This fueled two bubbles and a financial crisis, and it resulted in the pitiful "recovery" we're in now.

And so far, if the economy is reviving, most workers aren't sharing in it. Real, inflation-adjusted wages have fallen in three of the past four months. This has never happened outside recession before. So it's very possible we're following Europe into the depths of a new downturn.

Last September, I argued that "the real recession never ended" and that, in reality, it started a decade or more ago as labor participation peaked in the late 1990s. We've been sliding lower ever since, trying to compensate for a lack of high-quality jobs and stagnant pay, with voodoo stimulus efforts out of Washington and an extreme, inflation-igniting easy-money policy from the Federal Reserve.

The core problem has been a hollowing-out of America's manufacturing base because of increased globalization, the manipulative trade policies of China and others, and rapid technological change.

Washington, of course, hasn't done anything about trade or jobs (except talk, of course). But the U.S. economy may find a way out of the hole anyway.

The depth of the problem

Before moving on, it's worth remembering that something similar has happened before.

In many respects, the current situation resembles the Gilded Age of the late 1800s and the Long Depression, a global downturn that lasted from the 1870s through the 1890s. Replace the robber barons with hedge-fund managers and multinational CEOs, and the agitation over the Free Silver Movement with the Tea Party and the debate over the Federal Reserve's stimulus efforts, and the similarities are striking.

The downturn was preceded by a period of global economic integration as steam power, the telegraph and railroads made the world smaller. Workers lost jobs to technology and foreign competition. The banking system was rocked by the panics of 1873, 1884 and 1893, driven by real-estate bubbles and stock speculation.

Our current role was played by the United Kingdom, an aging sovereign struggling to maintain its role as the world's superpower. The role of the upstart United States is now played by vigorous up-and-comers like China and India. Check out this excerpt from A.E. Musson's "The Great Depression in Britain, 1873-1896: A Reappraisal":

"Britain was losing her technological lead; she was failing to modernize her plant, to develop new processes, or to modify her industrial structure with the same rapidity as Germany and the United States -- owing to conservatism, the heavy cost of replacing old plant, and deficiencies in technical education."

In other words, the British got lazy, making them vulnerable. We have the same problem now, and I outlined in "Are American workers getting lazy?"

Continued: U.S. workers are at a disadvantageSingle page12Next >RELATED ARTICLESAsk Anthony Mirhaydari: Where are stocks heading?- MSN MoneyWhy all signs point to chaos - 1 - Global economy - MSN MoneyHow to fix the black-hole economy - 1 - recession & recovery - MSN ...Will Ron Paul-onomics beat Obama? - 1 - election & economy - MSN MoneyNo, America isn't broke -- yet - 1 - economy and debt - MSN MoneyCan the Saudis save the economy? - 1 - Middle East unrest & oil ...VIDEO ON MSN MONEY/*$.dap("&PG=INVPEB&AP=1402",600,250,"ConAd-1");Feedback Share19026Share with Friends190Share/*').append($('#scplatformSocialToolBarMain').contents().clone()));$('.stb-boxstyle-l, .stb-boxstyle-r').append($('#scplatformSocialToolbarBox').contents().clone()).addClass('stb-boxstyle');jQuery.async('scp', function(){$.scp.async('\x2f\x2fus-social.s-msn.com\x2fs\x2fjs\x2f18.8\x2fue.min.js', function(){$('\x23ahead').not('.stb-boxstyle-l, .stb-boxstyle-r').not($('\x23ahead').next('div.stb-minitb').prev()).after($('').append($('#scplatformSocialToolBarMain').contents().clone()));$('.stb-boxstyle-l, .stb-boxstyle-r').not('.stb-boxstyle').append($('#scplatformSocialToolbarBox').contents().clone()).addClass('stb-boxstyle');});jQuery.scp.socialToolbar({"jsUrl":"//us-social.s-msn.com/s/js/18.8/ue.min.js","shareCountUrlBase":"//us.social.msn.com/boards","ajaxStubBaseUri":"http://socialcf.co1.msn.com/","responseBridgeUrl":"http://money.msn.com/responsebridge.min.htm","locale":"en-us","strings":{"lc_shrbtntooltipformatsingular":"Shared {0} time","lc_shrbtntooltipformatplurar":"Shared {0} times","lc_shrintro":"I thought you would be interested in this: {0}","lc_defml":"Email program","lc_hotml":"Hotmail","lc_gml":"Gmail","lc_yml":"Yahoo! 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Every one perceives the problem as it has effected them. They all may be some what right. Where we are now has been building for over thirty years and both political parties have contributed to it. I wish it was as simple to fix as who is elected or a few minor changes. May be the old house will need to be demolished and rebuilt from the ground up so in thirty years we are back to where we were so to speak. I have very few years left so I will never see the outcome but I hope it is good. 0 0ReportSpammhender22 minutes ago

The only way this country can recapture its former production fame is to demand equal trade with other countries.

I hate to quote the man because so many people dis-like him but...Rush Limbaugh said it best when he said "Nobody can "out-buisiness" the American businessman" it is our elected officials who tie the American Businesman's hands with unfair (to us) trade deals.

On a fair and level playing field, my money is on us, or should I say "U.S."

0 0ReportSpamRising Waters1 hour agoI'm sitting back drawing unemployment, waiting for the government or someone to come and knock on my door and offer me a really great job. With my unemployment and food stamps I have no intention of going out and finding a job that pays even a good bit more than my government benefits. Why should I? It costs money to go to work and it's much cheaper to stay home. Besides, day time television has gotten better with all the channels available for my big screen. Life is good. I'm voting Obama again. 0 4ReportSpamRichMingle.com...The millionaires club3 hours agoAnthony you are the only economist in American that knows what is going on. All the rest of the economists with their PHD's and Nobel praises should use them for toilet paper that is what there worth. I can't believe how far out of touch our congress, president, republican, demarcates and Romney are as to our economic problems.THe most important thing for us- poor people, have a millionaire dream and work for it. 4 2ReportSpamjazzpast3 hours agoThe United States is a Third World country now and Barack Hussein Obama is going to finish it off. America is going down just as ragged and poor as any other third world country. Obama is a Socialist out to destroy America. Obama wants a new MARXIST/SOCIALIST HITLER ERA! 10 9ReportSpamBigBob1234565 hours agoUSA! USA! USA! 13 1ReportSpamel homie loco6 hours ago

Made in america sounds great, now for all of you trolls out there this great country is being built by nationals and foreigners alike. do not blame reps or dems ,religion , creed or race back ground if you want to make this great nation grow , pick up a shovel and put somemuscle into it . america is the steam locomotive pulling the planet .contribute just like dad and gramps . do not sit on your arce behind a desk and whine . sit and rot or work and grow.

22 0ReportSpambob n LA6 hours agoThis man obviously doesn't check monitary charts- the dollar is stronger than it has been in some time. Retailers had their best christmas in 6 years and new car sales are higher than in the past 10. 2 2ReportSpamDennis Gibb6 hours agoDoes anyone see a problem here? OUR dollar is worth LESS than all other industrial countries and because of that we are moving the production back here. One question....What happens when OUR dollar is strong again? Will the companies cut the work force to go back to a cheaper country?You bet they will, it is all about money. Long gone are the days of WW2 and the large economic boom after the war. Now we have soldiers coming home and finding the world has gone to hell and they have nothing here. We have CEOs pulling in hundreds of millions as salary and the basic worker can't get more than 10 an hour. We have the FED thinking that throwing OUR money at industry will fix things instead of giving it back to us so we may spend it.I have a solution to the whole problem but, just like the FED everyone wants to argue the politics of the plan.It will continue to be a poor economy until people pull their heads out."made in America" fine by me as long as the quality is equal to or better than the imports. 10 1ReportSpamHey Now 64666 hours agoBankersam, you nailed it! 1 0ReportSpamel homie loco6 hours agothats not cool 0 0ReportSpamWhoopityDUE6 hours ago

Globalization was the beginning of the downfall. <<Workers in places like China are demanding more>> Sounds like quasi unions. UAW should be slobbering at the bit and head over to China so the leaders can continue to overpay and lavish themselves at the expense of the people buying union built products. Labor overreached and the corps went hunting which led to globalization and wage stagnation. I must part from my criticism of a couple of your last couple pieces of work and state the logic here and puzzle pieces are well connected.

The one item you did fail to mention is ever increasing advancements in technology/mechanization. Just as evident in mfg as much as it is in agriculture. Farmers used to make a decent standard of living on a few hundred acres of farm ground but now that would be, in most circumstances, considered an unprofitable venture and is considered a hobby farm which cannot provide for ample living standars . Labor needs have shrunk with technology, just a matter of fact.

The Chinese market manipulation of its trade and currency has been a major influence. I believe the ONLY reason you are seeing the mfg renaissance here is two fold 1)the labor pool in China demanding the higher wage coupled with 2)U.S. gov't pressure on China to let the renminbi appreciate all the while having the US dollar weaken through quant easing. Without this we wouldn't be seeing seeing any return of mfg jobs. We need to tread carefully to not begin what could turn into a slippery slope trade war.

Once in awhile you put out a good piece of work Anthony. This is one of them.

4 1ReportSpambankersam7 hours agoIt s real simple. Deregulation of essential services like utilities have led to insanely high prices and bad service. Deregulation of banks allowing them to act as brokerage firms has led to near collapse of the banking system similar to the great depression when the regulations were put in place. Big oil has been allowed to price fix at home and start needless conflicts overseas with countries like iraq. Similar to vietnam these conflicts benefit only big oil and their manufacturing subsidiaries. The us govt does nothing but watch, deny, and print more money. This has led to runaway inflation at the supermarket, the gas pump, and any other area of business not included in the govt. inflation calculation. As a result, the middle and lower class citizens of america have been fleeced of all discretionary income. We need our congress, president, and judicial system to begin acting in the interest of the people instead of the interest of corporations. Only then will our system work again. 35 1ReportSpamchuck jennings (old tuff)7 hours agoWe The People are the ones that will bring the econmy back by paying a little more and buying American products, we now can see what happens when we go cheap and fall down to the Wal-Mart mentaliity ! 19 0ReportSpamjavaman4227 hours ago

bought some jeans made in TN a couple of weeks ago. my work boots are from Wisconsin, some of my shirts are USA made. boot socks are made here. I had to pay more for some or them but I feel better when I wear American made clothes. I hope your hundai breaks down on the way to the unemployment office.

God bless America

34 3ReportSpamWe are the champions8 hours agoLow wages in America = Birth Control.Who can afford children? Healthcare? energy? gas? Food?For profit has made families an unaffordable dream and it is showing with America's COLLAPSED NON-EXISTENT BIRTHRATES.Capitalism is killing us dead. 5 16ReportSpamthatguyagain8 hours agoMade in America.......by illegal aliens using parts from China. 23 11ReportSpamal novotny8 hours ago It's all about low wages not regulations, businesses are sitting on 2 trillion in cash and still no jobs. When The Big Three send a car to Mexico for production the starting pay is $20 a day. In the US the starting wage for a autoworker is $200 a day with benefits. Whirlpool sending refrigerators to Mexico is the same thing, low pay, no benefits. Over 5 milllion jobs lost overseas since the year 2000, and more will follow until our wages drop to comparable levels with the rest of the world. There is no patriotism in capitalism. If a business can double their profit by moving jobs overseas they will not hesitate. The american consumer shares some of the blame for these job losses by buying products from companies who ship jobs out of the country. 20 4ReportSpamwayen wayen (Wayen)8 hours agoGood article MSN to bad you do not support American made products especially autos everytime I read your reviews top picks etc THERE ALL FORIEGN, why? If you talk about America in a postive way then get behind us and help the American auto makers. Yes there are foreign cars made here howvever the majority that are sold are still made over the pond and remember a lot of our money even though spent here goes over to japan, china and don;t forget korea !!! 17 0ReportSpamRocky Mtn High8 hours ago

If we as Americans keep pressure on our elected minions, eventually we will prevail.

Made in America, what a beautiful sound. I can't wait to see it and I think it will happen.

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